California's tech companies, the epicenter of the state's economy, have sent a loud message to policymakers this year: back off from restrictive artificial intelligence regulations or they'll leave.
The tactic appears to be working, activists say, as some policymakers have relaxed or abandoned guardrails to mitigate the biggest risks posed by AI.
Gov. Gavin Newsom rejected a bill aimed at making companion chatbots safer for children after it was opposed by the tech industry. In his veto announcement, the governor expressed concern about sweeping restrictions on artificial intelligence that have sparked a massive investment boom and created new billionaires overnight in the San Francisco Bay Area.
Assembly Bill 1064 would prohibit companion chatbot operators from providing access to these artificial intelligence systems to minors unless the chatbots were “predictably capable” of certain behaviors, including encouraging a child to engage in self-harm. Newsom said he supports the goal, but worries it will inadvertently prevent minors from using artificial intelligence tools and learning how to use technology safely.
“We cannot prepare our youth for a future in which AI is ubiquitous by completely preventing them from using these tools,” he wrote in his veto message.
The bill's veto was a blow to child safety advocates who pushed it through the state Legislature and a victory for tech company groups that fought it. In social media ads, groups like TechNet urged the public to tell the governor to veto the bill because it would hurt innovation and cause students to fall behind in school.
Organizations trying to rein in the world's biggest tech companies pushing powerful technologies say the tech industry has become more powerful at the national and state levels.
Meta, Google, OpenAI, Apple and other major tech companies have strengthened their relationships with the Trump administration. Companies are funding new organizations and political action committees to oppose government AI policies while pouring money into lobbying.
In Sacramento, artificial intelligence companies are lobbying behind the scenes for more freedom. California's huge pool of engineering talent, technology investors and companies makes it an attractive destination for the tech industry, but the companies are signaling to policymakers that other states are also interested in attracting that investment and jobs. Big tech companies are especially sensitive to the Golden State's rules because many companies are headquartered there and must comply with its rules.
“We believe California can find a better balance between protecting consumers and ensuring responsible technology growth,” Robert Boykin, TechNet's executive director for California and the Southwest, said in a statement.
Common Sense Media founder and CEO Jim Steyer said technology lobbyists put enormous pressure on Newsom to veto AB 1064. The bill was sponsored by Common Sense Media, a nonprofit that evaluates and analyzes technology and entertainment for families.
“They threaten to damage California’s economy,” he said. “That's the core message from tech companies.”
Advertising is among the tactics tech companies with deep pockets are using to persuade politicians to repeal or weaken legislation. Even if the governor signs a bill, companies occasionally sue to block new laws from going into effect.
“If you're really trying to do something bold in technology policy, you have a lot of hurdles to overcome,” said David Evan Harris, senior policy adviser at the California Technology and Democracy Initiative, which supported AB 1064. The group is focused on finding state-level solutions to the threats that AI, disinformation and new technologies pose to democracy.
Technology companies have threatened to move their headquarters and jobs to other states or countries, a risk looming over policymakers and regulators.
The California Chamber of Commerce, a broad business advocacy group that includes tech giants, launched a campaign this year warning that over-regulation could stifle innovation and hamper California.
“Increased competition could lead California companies to expand elsewhere, costing the state economy billions of dollars,” the group said in its report. website.
From January to September, the California Chamber of Commerce spent $11.48 million lobbying California lawmakers and regulators on various bills, documents filed with the California Secretary of State show. During this period, Meta spent $4.13 million. Lobbying records show Meta paid the California Chamber of Commerce $3.1 million, the majority of its expenses. Google, which also paid TechNet and the California Chamber of Commerce, spent $2.39 million.
Amazon, Uber, DoorDash and other tech companies each spent more than $1 million. TechNet spent about $800,000.
The threat that California companies could pull away has caught the attention of some politicians.
California Atty. Gen. Rob Bonta, who has investigated tech companies on child safety issues, noted that despite initial concerns, his office would not oppose plans to restructure ChatGPT maker OpenAI. The new structure gives OpenAI's nonprofit parent a stake in its for-profit public benefit corporation and clears the way for OpenAI to list its shares.
Bonta gave his blessing to the restructuring in part because of OpenAI's promise to remain on staff.
“Safety will be a priority, as well as a commitment that OpenAI will remain here in California,” he said in a statement last week. The AG's office, which oversees charitable foundations and ensures that those assets are used for public purposes, has been investigating OpenAI's restructuring plan for the past year and a half.
OpenAI CEO Sam Altman said he was happy to remain in California.
“California is my home and I love it here, and when I spoke with Attorney General Bonta two weeks ago, I made it clear that we are not going to do what other companies do and threaten to leave if they get sued,” he wrote on X.
Critics, which included some technology leaders such as Elon Musk, Meta and former OpenAI executives, as well as non-profit organizations and foundations, expressed concerns about OpenAI's restructuring plan. Some warned that this would allow startups to take advantage of charitable tax breaks and allow OpenAI to put financial gain above public good.
The attorney general's press office said Thursday that safety remains a top priority.
“Attorney General Bonta believes California can have a sustainable economy and regulations that encourage innovation and development, while also ensuring compliance with California laws and consumer safety. These are not mutually exclusive ideas,” the office said in a statement.
Lawmakers and advocacy groups say it's been a controversial year for technology regulation. The governor signed Assembly Bill 56, which requires platforms to post labels for minors warning about the mental health risks of social media. Another bill signed into law, Senate Bill 53, aims to make AI developers more transparent about security risks and offers more protections for whistleblowers.
The governor also signed a bill that requires chatbot operators to have procedures in place to prevent the creation of content related to suicide or self-harm. But advocacy groups, including Common Sense Media, withdrew their support for Senate Bill 243 because they said the tech industry was pushing for changes that would weaken its protections.
Newsom vetoed other legislation opposed by the tech industry, including Senate Bill 7, which would require employers to notify workers before implementing an “automated decision-making system” in hiring, promotions and other employment decisions.
Called the “Ban Boss Act,” the law failed to clear the governor, who thought it was too broad.
“The lawmaking process has demonstrated many nuances about the balance between providing meaningful protections and encouraging innovation,” said Julia Powles, professor and executive director of the UCLA Institute of Technology, Law and Policy. She added that the veto of SB 7 was an “unfortunate loss” because the bill aims to address concerns about the misuse of AI in the workplace.
The battle for AI safety is far from over. Assemblywoman Rebecca Bauer-Kahan (D-Orinda), who wrote AB 1064, said she plans to revive the law.
Child safety is an issue that both Democrats and Republicans are examining after parents sued artificial intelligence companies like OpenAI and Character.AI for allegedly contributing to their children's suicides.
“The harm that these chatbots are causing seems so fast and furious and public and real that I thought we would have a different outcome,” Bauer-Kahan said. “I always find it interesting when policy outcomes seem to fall short of what I think the public wants.”
Common Sense Media's Steyer said the new ballot initiative includes artificial intelligence security protections that Newsom vetoed.
“It was a failure, but not a total failure,” he said of the veto of AB 1064. “It’s a David and Goliath situation, and we are David.”
